Re-employment expectations and realisations: prediction errors and behavioural responses

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Using a nationally representative panel dataset, this study investigates the extent and impact of systematic misconceptions that the currently unemployed have about their prospect of re-employment. Such biased expectations are of interest because of their capacity to drive sub-optimal labour market behaviour. Specifically, people with unemployment experience of three to five years significantly underestimate their probability of re-employment. Simply having information about the individuals' previous unemployment experience is sufficient to produce more accurate predictions than those of the individuals themselves. People who underestimate their re-employment probability are less likely to search actively for a job and more likely to exit the labour force. If re-employed, they are more likely to accept lower wages, work fewer hours, work part-time and experience lower levels of life satisfaction. By improving the accuracy of re-employment expectations, employment agency caseworkers may use this information to enhance their clients' labour market decision-making and prevent adverse job-seeking behaviours.
Original languageEnglish
Pages (from-to)161-176
Number of pages16
JournalLabour Economics
Volume44
DOIs
Publication statusPublished - Jan 2017

Keywords

  • Job insecurity
  • Prediction errors
  • Re-employment expectations

Cite this

@article{aaa14cf2ff4f4af196b83e2da17d71d3,
title = "Re-employment expectations and realisations: prediction errors and behavioural responses",
abstract = "Using a nationally representative panel dataset, this study investigates the extent and impact of systematic misconceptions that the currently unemployed have about their prospect of re-employment. Such biased expectations are of interest because of their capacity to drive sub-optimal labour market behaviour. Specifically, people with unemployment experience of three to five years significantly underestimate their probability of re-employment. Simply having information about the individuals' previous unemployment experience is sufficient to produce more accurate predictions than those of the individuals themselves. People who underestimate their re-employment probability are less likely to search actively for a job and more likely to exit the labour force. If re-employed, they are more likely to accept lower wages, work fewer hours, work part-time and experience lower levels of life satisfaction. By improving the accuracy of re-employment expectations, employment agency caseworkers may use this information to enhance their clients' labour market decision-making and prevent adverse job-seeking behaviours.",
keywords = "Job insecurity, Prediction errors, Re-employment expectations",
author = "Kassenboehmer, {Sonja C.} and Sonja Schatz",
year = "2017",
month = "1",
doi = "10.1016/j.labeco.2016.12.005",
language = "English",
volume = "44",
pages = "161--176",
journal = "Labour Economics",
issn = "0927-5371",
publisher = "Elsevier",

}

Re-employment expectations and realisations : prediction errors and behavioural responses. / Kassenboehmer, Sonja C.; Schatz, Sonja.

In: Labour Economics, Vol. 44, 01.2017, p. 161-176.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Re-employment expectations and realisations

T2 - prediction errors and behavioural responses

AU - Kassenboehmer, Sonja C.

AU - Schatz, Sonja

PY - 2017/1

Y1 - 2017/1

N2 - Using a nationally representative panel dataset, this study investigates the extent and impact of systematic misconceptions that the currently unemployed have about their prospect of re-employment. Such biased expectations are of interest because of their capacity to drive sub-optimal labour market behaviour. Specifically, people with unemployment experience of three to five years significantly underestimate their probability of re-employment. Simply having information about the individuals' previous unemployment experience is sufficient to produce more accurate predictions than those of the individuals themselves. People who underestimate their re-employment probability are less likely to search actively for a job and more likely to exit the labour force. If re-employed, they are more likely to accept lower wages, work fewer hours, work part-time and experience lower levels of life satisfaction. By improving the accuracy of re-employment expectations, employment agency caseworkers may use this information to enhance their clients' labour market decision-making and prevent adverse job-seeking behaviours.

AB - Using a nationally representative panel dataset, this study investigates the extent and impact of systematic misconceptions that the currently unemployed have about their prospect of re-employment. Such biased expectations are of interest because of their capacity to drive sub-optimal labour market behaviour. Specifically, people with unemployment experience of three to five years significantly underestimate their probability of re-employment. Simply having information about the individuals' previous unemployment experience is sufficient to produce more accurate predictions than those of the individuals themselves. People who underestimate their re-employment probability are less likely to search actively for a job and more likely to exit the labour force. If re-employed, they are more likely to accept lower wages, work fewer hours, work part-time and experience lower levels of life satisfaction. By improving the accuracy of re-employment expectations, employment agency caseworkers may use this information to enhance their clients' labour market decision-making and prevent adverse job-seeking behaviours.

KW - Job insecurity

KW - Prediction errors

KW - Re-employment expectations

UR - https://www-scopus-com.ezproxy.lib.monash.edu.au/record/display.uri?eid=2-s2.0-85011959085&origin=resultslist&

U2 - 10.1016/j.labeco.2016.12.005

DO - 10.1016/j.labeco.2016.12.005

M3 - Article

VL - 44

SP - 161

EP - 176

JO - Labour Economics

JF - Labour Economics

SN - 0927-5371

ER -